Refer to the information provided in Table 9.7 below to answer the questions that follow.
Table 9.7
All Numbers are in $ Million
-Refer to Table 9.7. Suppose the economy is in equilibrium and the government raises taxes from $200 million to $250 million, equilibrium output will ________ by $________ million.

Question

Refer to the information provided in Table 9.7 below to answer the questions that follow.
Table 9.7
All Numbers are in $ Million 
-Refer to Table 9.7. Suppose the economy is in equilibrium and the government raises taxes from $200 million to $250 million, equilibrium output will ________ by $________ million.

Quizplus · Accepted Answer

The increase in taxes reduces disposable income, leading to a decrease in consumption and thus a decrease in equilibrium output. The multiplier effect means the impact is larger than the initial tax increase, often resulting in a decrease in output that is a multiple of the tax increase, hence the $200 million decrease is a plausible outcome given a multiplier effect.

Refer to the Information Provided in Table 9